NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report
A research report states a target price of Rs 1,200 for a stock but does not mention the assumptions on growth, margins or discount rate behind it. Which quality of a good research report is mainly lacking?
The missing quality is transparency of assumptions and methodology. A target price without the growth, margin and discount rate assumptions behind it cannot be verified or tested by readers, so the report fails the standard of clear, supported and reasoned conclusions.
- ATimeliness
- BTransparency of assumptions and methodologyCorrect
- CBrevity
- DUse of graphics
Explanation
A good report clearly explains the basis of its valuation so readers can test and replicate it. Omitting growth, margin and discount rate assumptions makes the target price unverifiable, which is a lack of transparency. Brevity or graphics do not remedy this.
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